Ashley McDonald

Aon New Zealand

WINERY INSURANCE RISK

TODAY WE WILL….• Seddon Earthquake

• What was the real loss

• What was the cost of Seddon

• Resulting Underwriting

• Premiums

• Coverage changes

• Conclusions

THE SEDDON EARTHQUAKE 2013

• What was damaged

• Buildings

• Tanks

• Concrete Foundations and Concrete Pads

• Wine Product

• Bottle damage

WHAT WAS THE REAL LOSS • Buildings

• Tanks

• Concrete Foundations and Concrete Pads

• Wine Product & bottle damage

• Future Sales – up to 5 years

• Effect on cash flow

• Future development of the business

• Market share

WHAT WAS THE COST FOR SEDDON?

• Seddon

• Estimated at $250 million?

• Napa

• Estimated are $300 million USD (as at 1st of Sept 14)

only 5% of people have any earthquake insurance

RESULTING UNDERWRITING• What are you doing to minimise the risk?

What % of NBS do you comply with?

What is the construction & how will it react?

What is the soil at the location like?

Fire Loading?

Accumulation?

RESULTING UNDERWRITING• What are you doing to minimise the risk?

Baffling the tanks

Strengthening of tank bases

Strengthening of the foundations

What alternative products are available e.g. plastic tanks

INSURANCE COVER• Will it be available?

• All the premiums are made up as follows

• Before the Earthquakes, it was

PREMIUMS

Acc. DamageFireBurglaryNatural DisasterImpactLightningExplosionStorm/CycloneWater DamageMalicious Damage

• All the premiums are made up as follows

• After the Earthquakes, it is now

PREMIUMS

Acc. DamageFireBurglaryNatural DisasterImpactLightningExplosionStorm/CycloneWater DamageMalicious Damage

COVERAGE CHANGES

More self-insurance required of clients

Previously 2.5% of the loss

$1,000,000 damage claim @ 2.5% = $25,000 excess

Now 5% of the site value for each and every event

$10,000,000 sum insured @ 5% = $500,000 excess

(regardless of the claim size)

COVERAGE CHANGES

• No automatic reinstatement of the sum insured unless agreed in writing and an additional premium is paid

• No repairs until the excess is paid.

• No claim for upgrading undamaged property in accordance with regulations

• Higher premiums

CONCLUSION• Higher premiums (top end of the rating scale and no chance of

reduction)

• Self-insurance levels being carried by the winery increasing

• Upgrade costs being imposed on the winery instead of being able to budget for it.

• Council problems – no code of compliance until the entire premises up to code, not just the damaged property.

CONCLUSION• Insurance companies will be looking for ‘prudent’ clients

who are managing the risk

• Insurance companies will charge the winery for the risk as they see it